Commentary on Radio & Audio

January 2015

January 14, 2015

There was a time in radio, back when I was a teen, when an owner could own 14 radio stations total -- seven AMs and seven FMs, as well as up to seven TV stations. (And no three of those broadcast stations could be within a hundred miles of each other.) But a few years later things changed, and in 1984 the FCC began allowing a single owner to own 12 stations.

And so it stayed, until a pioneer in the industry decided to push the limits, increasing his portfolio by leasing stations rather than buying them. Smartly, he leased as many stations in the same markets as the FCC would allow so he could take advantage of economies of scale. People were up in arms over his tactics, but other owners soon followed suit.

Bud Paxson told me at the time that he had a plan: Other industries were being deregulated, and he had the same vision for radio. He had a war chest of billions after founding Home Shopping Network, so he went to war with the FCC, challenging the limits on ownership. Over the course of several years, Paxson further tested the FCC’s regulations. Eventually he and his allies won: Congress passed the Telecommunications Act of 1996, allowing radio and TV consolidation.

Bud already had his stations lined up, with clever lease agreements that allowed him to purchase his leased stations after any regulatory changes. Thus, Paxson Broadcasting became the first consolidated radio company and rapidly expanded to become the first supergroup in American radio. Paxson eventually sold out to Steve Hicks’ Capstar, which consolidated smaller companies that had built big portfolios. That company merged with Jimmy de Castro’s AMFM Broadcasting and, eventually, Clear Channel.

Everything we see in radio today is a direct result of Bud Paxson’s vision and willingness to challenge the status quo. Groups’ ability to own more stations in more markets started with Paxson’s dream. Others, like Steve and Tom Hicks, carried it to the next level.

I frequently met Paxson because we both lived in Palm Beach — and after the first time I talked with him, I wrote that he was the smartest man I had ever met. His brain simply worked differently. He broke all the rules in radio and television, and, after HSN, he built a second empire, making billions more. Then he left the industry at the perfect time while others, years later, got stuck with tremendous debt.

Bud was a devout Christian, unapologetic about his faith, though some couldn’t understand his passion and a few even thought he was a little out there. But he never seemed to care what others thought. Bud was not only a visionary, but a risk taker. One day when I visited he had just purchased syndication rights for Touched by an Angel for an unheard-of $75 million, because he believed the show helped lead people to Christianity. He told me that day that he had no idea whether it would pay off, and that it would mean significant damage to his company if it failed, but he had faith that it was part of God’s plan and everything would work out. And it did: Though the trades thought he was insane, he was simply ahead of everyone else, and soon such prices for syndication rights became the standard.

Bud passed away this week, and many in the industry have never before heard his story.

Around the same time Bud was breaking rules, I was visited by a young man fresh out of grad school at Harvard. He was probably about 23 at the time, and he wanted to meet me. He told me about the research company he was founding and his long-term dream of being the biggest broadcaster in America. Dick Downes and I left that meeting and said to one another that this young man was one of the smartest people we had ever met. We both felt he actually would achieve his goal. And he’s doing fine so far: Today Lew Dickey, jr heads radio’s second-largest company.

As I was thinking about Bud, I recalled that first meeting with Lew Dickey, who could not have built Cumulus if the way hadn’t been paved by Paxson and, later, by Larry Wilson, another early consolidator.

This week I’ll be attending Bud Paxson’s funeral. Though he was demanding and hard to work for, and legendary for his screaming outbursts (later attributed to chronic low blood sugar), he will be remembered as a man who changed radio forever. Few anticipated the results — positive and negative — of radio consolidation. Bud launched careers, employing and training a number of the legendary broadcasters who will be there to honor his life and his impact on their lives. Many in this industry made hundreds of millions because Paxson paved the way for consolidation.

These stories of radio visionaries are important because history repeats itself and because we can learn from the tremendous efforts men and women before us have worked to our benefit. I feel blessed to have known Paxson and fortunate to be in the right place at the right time to meet a young Lew Dickey, and, decades before that, a young Bob Pittman and others. These lessons, however, are of little value unless we’re determined to make the most of them.

You may be the next great radio visionary. It starts, like Paxson, with questioning the status quo and having the guts to challenge it.

Eric Rhoads

Events & Ideas

Everyone within the niche industries of Hispanic Radio Broadcasting and Sports Radio Broadcasting will be gathering to share best practices, trends, and resolve issues related to their formats. Both the Sports Radio Conference and the Hispanic Radio Conference will take place in Dallas on March 4-5 at the Omni Park West in Dallas. If you’re in either area of the radio industry, you’ll benefit greatly from the sessions and the networking. To learn, more visit their respective websites at www.hispanicradioconference.com and www.sportsradioconference.com.

As many predicted, the agency and advertiser world has fallen in love with digital and social media marketing and is demanding solutions from broadcasters that go beyond old school web ads. The Radio Ink Convergence Digital Media Conference addresses these issues by bringing together tech-industry outsiders who can bring new vision and ideas with best-in-breed radio-industry insiders to focus on the entire digital spectrum as it relates to advertising sales, programming, and online audio. This is an ideal setting for general managers, sales managers, programmers, and digital specialists from radio and online audio. To learn more, visit www.radioconvergence.com.

January 06, 2015

What happens in Vegas does not stay in Vegas -- not this week, anyway. The largest technology convention in the world, the International Consumer Electronics Show, is always causing buzz in the tech world in the first weeks of the new year. What happens at CES is what will soon happen everywhere, as orders come in from buyers who'll place these products in their stores and catalogues and try to determine what will be hot for next Christmas. CES is always a beacon of what's to come.

But something new is happening at CES this year. An entire new automotive section has been created because of the buzz about the electronics in the car center stack -- that is, the connected car.

Speaking at the Radio Ink-Jacobs Media DASH conference in Detroit, Consumer Electronics Association CEO Gary Shapiro told the audience that he has been warning radio about competition in the car for years, but those warnings fell on deaf ears in the radio industry. Of course, Radio Ink first revealed the magnitude of this movement some years ago, and was met with similar resistance.

Many of you have already shot the messenger.

At our first DASH conference, experts from the automotive industry predicted that 2015 would be a major year for new car sales because of the giant fleet of 10- to 12-year-old cars still on the road. They also predicted it would be the year that most new models of cars would be offering in-car connectivity.

If you were in attendance, you've seen all this coming true and learned details about how it affects your listeners, right down to their ability to find and use broadcast radio in the car. You've also seen research indicating a strong bias for radio by loyal radio listeners -- who nonetheless found themselves easily converted to online listeners in the car.

Why am I telling you this?

If 2015 is indeed the largest new-car sales year in history, and if online radio is present and connected on the dash in a significant number of those new cars, that will affect your audience -- definitely in some small ways, and possibly in a big way. It's not too late to make sure you're reinforcing your footing with your audience and ensuring they can find you once they move to a connected car.

But this starts with understanding the connected car yourself. Every market manager, sales manager, and program director needs to go test drive every major brand of vehicle and experience all the variations on the connected car and how AM/FM radio is, or isn't, easily found.

A few diehard radio executives continue to insist radio can defend its turf and its future without adapting much, or at all. Others within our industry think online radio in the car is just another fad, citing issues with the high costs of streaming and music licensing fees that, they think, will make the model unsustainable. On the other hand, many of the non-radio-industry experts at CES believe those protests are meaningless. They think it's all over for radio.

The radio industry cannot deny what is happening in these new connected vehicles and how they are the showcased stars at CES this year. Though the day when every car on the road is connected may be a decade or more away, every car is already potentially connected today, even if it's just a smartphone playing music in a cup holder. And it all can be used to reinforce the idea that radio is on its way out.

No, radio is not going to stop this freight train. Connected cars are now a reality, and your online competitors, the darlings of the tech world, are now front and center in the dash.

Yet radio continues to hold deep relationships with its audiences. But erosion is happening, and digital alternatives are building audiences. Radio is not over, but the very premise of radio listening in the car is being challenged.

You can't afford to ignore the potential impact on your business for the long term. You should cultivate a healthy willingness to defend your turf, to make sure you're not handing your audiences away to alternatives that offer consumers different listening experiences, and to make radio better than ever at every turn, so audiences won't want to leave.

Radio still has the cume, still has the majority of listening, and needs to fight to keep that gap as wide as possible. We'll also have to fight mistaken perceptions as the visibility of the connected car grows, even as wrong assumptions about online listening and the future of radio are spread by the novelty-loving media.

I'm not indicating for a moment that this is the beginning of the end, but I do believe that whenever anyone is threatening your future, it's critical to take it seriously and be the very best you can be to prevent it.

Radio needs to continue to reinforce its relevance with listeners, and promote the FM chip and the NextRadio app. You need to protect what everyone wants to take from you. You can't do that if you ignore the huge visibility CES and other venues are giving the connected car and the role of streaming on those dashboards.